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Is a Mortgage Too Much in Retirement?

Jun 15, 2021 5 min read Prudential Staff

Key takeaways

  • Start with a goal in mind. This way, your decisions align with what’s most important to you.
  • Tally up your assets, income sources and expenses to understand your financial position.
  • Consider downsizing, renting or trimming expenses if it makes sense.


One of the biggest decisions in your retirement years may be whether to continue holding (and paying) a mortgage.

Whether they want to or not, Americans increasingly carry debt into retirement. According to the Federal Reserve’s most recent Survey of Consumer Finances Opens in new window,* the median household headed by someone 65 to 74 had a mortgage debt of $89,000 in 2019. (The median is the middle result when you line up responses by size, so roughly half of all households had more debt than that.) What’s more, 28% of households headed by someone over 74 owed money on a home, up from just 10% in 2001.

COVID-19 has also put many Americans who may be thinking of retiring in a tight spot. The Harvard Joint Center for Housing Studies Opens in new window reports that due to the pandemic, nearly 26% of renters and 21% of owners age 65 and older have reported a loss of employment income.

This may raise many people’s concerns about their ability to earn—and save—during their last few years before retirement. After all, large debt payments take money away from other retirement wants and needs, like travel and health care.

Still, you need to live somewhere once your working days are done. These steps can help you decide how to approach it.



  1. 1. Clarify your goals

    Imagining your “future self” can help you get the retirement you want. Decide what you want your post-career years to look like with your housing situation in mind: Do you hope to travel often? Do you enjoy staying at home? Will you be able to maintain a home yourself? Would you rather have someone else handle everything?

    Ultimately, your housing decisions can affect how much time and money you’ll have available for recreation, self-care and other retirement activities.


  1. 2. Understand your possible expenses

    Estimate your expenses, and include costs besides housing. For example, you might want to plan for:

  • Out-of-pocket medical expenses for items Medicare doesn’t cover Opens in new window
  • Payments on any remaining debts (auto loans or credit card balances, for example)
  • Funds to help your grandchildren or adult children (especially those who may depend on you for care)
  • Helping aging parents, including financial support and visitation expenses
  • Funeral costs for parents, spouses or partners
  • Taxes on any income you receive or investments you sell at a profit
  • Pet care
  • Food, household staples and entertainment


  1. 3. Make a plan

    Evaluate your situation and determine if you’re on track to cover all your expenses with retirement income you expect. For example, you might have pension income, Social Security benefits or annuity income on the way. You may also have investments you plan to draw from to supplement those guaranteed sources. Ideally, the numbers indicate you’ll have a few options for retirement.

    What if your expected resources don’t seem like they’ll be enough to cover your projected expenses? You’ll either need to make more money or plan to make some cuts. Ask yourself if it’s possible to trim costs in several areas. Could you eat out less often, for example, or choose more economical travel options? Sometimes several small adjustments are easier to stomach than drastic cuts in one area.


  2. 4. Choose where to live

    With a clear view of your goals, expenses and financial resources, you can make an informed decision on what type of home to live in, and where. If housing payments—mortgage, upkeep or otherwise—are a burden, you’ll need to consider alternatives. For example, you might downsize, which allows you to declutter and select a home that’s easier to maintain. Retirees sometimes find this a rewarding experience, and you can favor homes that are easier to live in as you age.

    Renting is another option. You can find housing that fits your budget, and it’s less cumbersome to move to a rental home (and from one, should you want to in the future), as you won’t have to worry about the numerous administrative steps associated with selling.

    By downsizing or renting, you can potentially simplify your life. For example, you might have fewer maintenance costs, and it may be easier to leave your property for extended periods of travel.

    All that said, staying in your current home takes the least amount of effort, and you can continue to enjoy the community and living space you’ve grown accustomed to.


Pay down (or pay off) your mortgage

If high mortgage payments concern you, you don’t necessarily need to move or downsize. For example, if you have a large amount of cash sitting around, consider using it to pay down your loan balance. This way, by owing less principal, you can ask your lender to restructure your payments so you end up with a monthly bill that fits your budget. With interest rates at or near historic lows—at least for now—you might also consider refinancing if it can save you money while shortening the term of your loan.

Making a lump sum payment on your mortgage—whether you pay it off completely or just reduce the balance—might also be an option if a loved one dies and you inherit a sizable sum or receive a life insurance payout. That’s because your household might lose Social Security income (your spouse’s, for example). You can also consider selling investments to generate cash. In either case, it’s essential to discuss any tax consequences with an advisor like a CPA.


What you can do next

Imagine how your ideal retirement will look in terms of daily activities around the house, special events and travel. Then arrange to meet with a financial planner who can help you compare your resources with your anticipated spending needs. They can advise you on whether a given mortgage is too much—or if you’re even in a position to have a mortgage at all.


Prudential's editorial team provides readers with valuable information on personal finances, retirement saving and planning for the unexpected.


  1. *See Table 13 of the downloadable “Estimates inflation-adjusted to 2019 dollars Opens in new window” spreadsheet


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